KM3 TRADING BUSINESS PLAN

KM3 TradingA Business Plan Trading Forex

by Robert Hayne


by Robert Hayne

Introduction

KM3 TradingIntroduction

• Foreign exchange is the most widely traded commodity in the world today, with a purported $3 trillion traded daily and where an estimated 60% of all transactions are managed by just 5 of the world’s leading banks

• With so much liquidity and volatility, opportunity abounds; as does risk naturally. The risk of capital loss is real; but so is the potential for exceptional returns

• There are in excess of 2,000 Forex brokers to choose from as far as the individual investor is concerned; all of whom are evaluated by an organisation called The Forex Peace Army, an online forum. Imperative, is that a broker with a sound reputation is sought

KM3 TradingIntroduction (Contd.)

• A marked difference between trading forex and trading stocks can be found in the varying forms of fundamental analysis applied

• With forex, there are no audits to determine a currency’s inherent value as is the case with individual stocks. Influencers are largely the global economic indicators in the form of Production Price Index data, Consumer Price Index data, Interest Rate announcements, Federal Reserve Bank/ BOE/ ECB decisions, employment data as well as other data in the form of Retail Sales etc. that affect the currency values of each country represented

• Language is another key driver in affecting price movement - how “dovish” or how “hawkish” the US Federal Reserve Governor is perceived in what is said, can be critical to the direction of currency crosses where the US Dollar is concerned

KM3 TradingIntroduction (Contd.)

• Once a fundamental trend is established through how the economic macros are performing, price movement is largely technical, with support and resistance levels being key and where Fibonacci Mathematics will determine levels of both buying and selling that provide the trader with the probabilities he/ she needs to succeed

• Forex trading is part art, part science and can at times be wholly non-linear in the way it presents itself


by Robert Hayne

Robert Wentworth-Hayne

KM3 TradingRobert Wentworth-Hayne

• Highly astute, competent and experienced Senior Sales and Marketing Management Professional with 25 years’ experience

• Versatile industry acumen having worked in the Broadcasting (SABC Radio), Beverages (SAB), Media and Advertising and Real Estate sectors

• Strong pedigree in media strategy and advertising having worked as a Media Director at Ogilvy & Mather Africa compiling media strategies and implementing media campaigns into Africa on behalf of SABMiller, DStv, SuperSport, Land Rover, OLX, WeChat and more.

• I worked for 5 years as a Media Manager at SAB where I managed their advertising media budget of R130 million

• Strong pedigree and expertise in Advertising, Brand Strategy, Media Planning, Media Buying, Public Relations and Business Communications, New Business Development, Marketing Strategy, Branding, Market Research and Consumer Relationship Marketing

KM3 TradingRobert Wentworth-Hayne (Contd.)

• Having majored in Economics at the University of South Africa (1999), applied that thinking towards a complete career shift in 2003 towards trading financial instruments

• Skills gained in every manner of Technical Chart Analysis, Elliot Wave Theory, Fibonacci Mathematics, as well as having written statistical models and programs in Visual Basic and MS Excel

• More than 12 years experience in the movement of currency prices and in trading forex

• Has developed SPOpt7, a bespoke and proprietary mathematical formula that identifies price levels within a standard deviation of 0.5%


by Robert Hayne

Principles

KM3 TradingPrinciples

• Trading is distinct from gambling in that KM3 Trading applies measured science based on positive, expected outcomes in the long run. There is no crystal ball as such and getting direction from the stars is not going to work. Whilst prices move constantly, the KM3 trader does not trade constantly as trade selectivity is critical to profitability

• KM3 Trading is a business like any other, where the objective is to present a positive ROI over a period in excess of 3 years; and one that is potentially more viable than any single other opportunity on offer

• Awareness of economic data and their release, fused with established technical analysis norms is applied

• An approach that pursues price progression on an intraday basis and avoids ranges

KM3 TradingPrinciples (Contd.)

• A systemised risk management method

• A reward mechanism based on proprietary mathematics that presents an exceedingly viable ROI

• Losing trades are exited early; whilst profitable trades are allowed to run and reach their optimal, realistic potential


by Robert Hayne

Method

KM3 TradingMethod

• The “Trend is your Friend” is oft cited as the best piece of advice in market trading. Where it fails is in specifying the time frame concerned. An hourly trend can emerge that is counter to the overall daily trend and can be highly profitable. That said, account is always first taken of what the longer time frame is saying

• The importance is to trade progression and to avoid ranges that Elliot Wave Theory describes as “reactive waves”. Definition, positive movement and a degree of certainty is critical because there is no crystal ball as it were

• Highly appropriate is that prices in progression make higher highs and lows in an uptrend or lower lows and highs in a downtrend. When that philosophy is broken, reversals happen and the trader is able to enter a whole new price movement early

KM3 TradingMethod (Contd.)

• Risk and Reward levels are critical for success. KM3 has a clear manner in the establishment of these as well as in adapting to changes in structure that so often occurs by staying in the moment and the now

• Of critical importance is clear money management principles. The success or failure of each individual outcome is not 100% certain but random. A fundamental aspect of trading is that anything can happen in the market and any belief to the contrary is an arrogance that will lead to an overall loss of capital. Good psychology is imperative and that entails the utmost of humility

• The accompanying Stat Model will reflect that any individual trade size that risks more than 5,5% of account capital is doomed in the long run. Drawdowns are an essential element in any stock price and a trading account is no different. KM3’s method is that below 40% of trading capital at any one time is undesirable, although the Stat Model will show that through the random test analysis that this is possible


by Robert Hayne

Examples

KM3 TradingExample 1 – The Breakout

Key Aspects: -1. The optimum break occurs at the 4th bar where an Entry Level Order is placed and execution is automatic2. The Stop Loss is placed at the bottom of the breakout bar3. SPOpt7 identifies key target points4. This particular trade provided a 364% return on what was risked (3% of the account balance)

KM3 TradingExample 2 – SPOpt7 Symmetry

Key Aspects: -1. For 2 months in 2015, USDJPY traded between clearly defined levels; formulated by KM3’s

proprietary mathematical model, SPOpt7

KM3 TradingExample 3 – SPOpt7 Exact

Key Aspects: -1. On occasion, there is ZERO deviation

EURUSD(24th February 2016)

KM3 TradingExample 4 – SPOpt7 Margin of Error

Key Aspects: -1. On other occasions, the deviation can be as little as 0.000072. There is no substitute for watching the price action; especially seeing that in this case, NFP

data was to be released and the good discretion was to cover and take profit

KM3 TradingExample 5 – The Level 7 Bounce

Key Aspects: -1. SPOpt7 is a mathematical formula that has been determined through 12 years of intense analysis and

testing2. A high probability trade where the risk is minor and the return is exceptional

KM3 TradingExample 6 – Understanding Elliot Wave Theory Part 1

Key Aspects: -1. Wave 3 is always the largest wave in the move2. If Wave 2 is relatively structured, Wave 4 becomes most dysfunctional as the price moves into a range.

Avoidance is applied until definition is re-established

KM3 TradingExample 7 – Understanding Elliot Wave Theory Part 2

Key Aspects: -1. Elliot Wave Theory stipulates that if

the area between Wave 1 and Wave 2 is breached, the most recent move is not progressive and will ultimately fail; which is what occurred in this example

KM3 TradingExample 8 – How anything can happen

Key Aspects: -1. There is a powerful method in trading called the Ross Hook named after Joe Ross who developed it. The price moves and then

in the ensuing bar; it lags. A trade placed at the top of the lag bar is mostly highly lucrative as the price continues in an upward direction in this case

2. On the left chart, the price simply entered a range where the trade was exited at very little loss to the account. On the right, the price continued to move up and was highly profitable

3. The rule is that if the price does not break forth in the bar after the lag bar; it is time to exit and accept the loss

KM3 TradingExample 9 – Stat Model

Key Aspects: -1. Statistical modelling is imperative in trading financial instruments for long term profitability2. The model will show that given the odds established over 12 years, a 5,5% risk level per individual

outcome is optimal in producing exceptional returns over a multiple year period

Capital P/L Rands$1 000 R 15 000

Month 1 $1 262 $262 R 3 933Month 2 $794 -$468 R -7 026

20 Month 3 $884 $90 R 1 351Month 4 $722 -$162 R -2 429Month 5 $666 -$56 R -840

$1 000 5,5% -120 +160 Month 6 $980 $314 R 4 715Wk Trade Size P/L Balance P/L The sequence of wins to losses is random Month 7 $1 074 $93 R 1 3991 $2,8 $429 $1 429 $429 Account should not go lower than 40% Month 8 $1 330 $256 R 3 8422 $3,9 $224 $1 653 $224 Hence, 3% is the optimal trade risk Month 9 $1 693 $363 R 5 4473 $4,5 $459 $2 112 $459 Month 10 $2 668 $976 R 14 6334 $5,8 $296 $2 408 $296 Month 11 $4 725 $2 057 R 30 852

$1 408 Month 12 $5 623 $898 R 13 465R 21 125 Ave. $385 R 5 778

2 gain 20 pips

3 lose 20 pipsPip Risk

12 trades per week 4 lose 15 pips

1 gains 60 pips2 gain 30 pips

RANDOM YEAR MULTIPLE YEARRANDOM MONTH

CAPEX

100 months


by Robert Hayne

The Art of Execution

KM3 TradingThe Art of Execution - Principles

• To borrow from Jack Welch (GE) – “Trading is actually very straightforward. You pick a general direction and execute like hell”.

• Despite the presence of structure, KM3 Trading is not pure science where instinctive expression is ruled out entirely. That said - where that expression begins to break down due to fatigue or negative emotion, a revert to form is applied sooner rather than later, and where a drawdown on client equity to less than 40% of the prevailing account equity is not tolerated

• KM3 execution works on the conviction of direction and movement towards a target, and with an open minded view of staying in the moment that anything to the contrary can happen

• The sooner a loss is recognised, the better. “A mistake is not something to be determined after the fact, but in light of the information available until that point”


by Robert Hayne

The Opportunity

KM3 TradingOpportunity - Objective

• The objective is to make a consistent living out of trading forex

• Income of $1,600 (R25,000) monthly is needed OR $400 per week

• Capital of $8,000 (R120,000) is needed to achieve that based on a monthly return of 20%

KM3 TradingOpportunity – Expected Monthly Returns (Based on 100 Random Simulations)


by Robert Hayne

Summary

KM3 TradingSummary

• “If you take risks and face your fate with dignity, there is nothing you can do that makes you small; if you don’t take risks, there is nothing you can do that makes you grand. Nothing” - Nassim Nicholas Taleb

• Forex trading does bear the risk of capital loss to the investor

• A compounded monthly return of 20% means a 3 year ROI of 70880%. This is the KM3 opportunity


by Robert Hayne

Thank You

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KM3 TRADING BUSINESS PLAN